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Can You Open Fiscal Space by Closing Civic Space?

Not if you want domestic revenue mobilization to succeed

Why we must not trade civic space for fiscal revenue

We hope you share this blog on social media. But if you live in Uganda, it might cost you. Literally. On July 1, the government of Uganda enacted a social media tax, as well as a mobile money tax – which will make freedom of expression and access to information more expensive.

The government has committed to step up its efforts around revenue collection, or Domestic Revenue Mobilisation (DRM) – joining 42 other countries as signatories of the Addis Tax Initiative (ATI). In development circles, there is increasing emphasis on DRM and getting countries to be less dependent on external funders who may have their own agenda. But should the basic human rights to freedom of expression, access to information and inclusion be sacrificed at the altar of domestic revenue collection?

Of course not. In fact, it is likely to be counterproductive.

Part of wider crack down on civil society

Restricting space for citizens to raise their voices in exchange for tax revenue is not a viable domestic revenue strategy. Reducing civic space erodes the social contract between citizens and government, which is the most important component of a strong and fair tax system. With restricted civic space, citizens have no avenue to hold government accountable. The taxes have evoked a lot of ire among citizens who already feel stifled in offline civic spaces that the government has actively clamped down on.

Tax policy (and Domestic Revenue Mobilisation strategies) should be designed to reverse these trends, not accelerate them.

Ironically, these taxes only serve to sow suspicion against a government that is bent on collecting money from a silenced citizenry. If citizens do not trust their government or its institutions, raising revenue will be an incredibly difficult task (ask any tax administration about the importance of voluntary compliance). And in Uganda, efforts to increase domestic revenue are already quite challenging – collecting very little and relying greatly on consumption-based taxes, which disproportionately affect poorer households.

Better ways to raise revenue

There are many ways to raise revenue without overburdening citizens and violating their rights. Why not take up excise tax reforms (as proposed by Tax Justice Alliance-Uganda) which could raise at least 122 billion Ugandan shillings? Or reduce tax exemptions that, according to research by Oxfam and SEATINI1, amount to US$630 million annually – a big chunk of which are giveaways to the most capable taxpayers, including foreign companies and even parliamentarians. These are just two potential options for Uganda to consider.

Uganda has recently announced its intention to develop a Medium-Term Revenue Strategy (MTRS) – something that donors like the IMF and World Bank are keen to support. Its success will depend on generating broad buy-in from Ugandan society and greater trust. Repealing the social media and mobile money taxes would be a good start to winning back citizens. But a public dialogue on creating a fair and transparent tax system is the necessary next step.